Magazine article CMA - the Management Accounting Magazine

The Siren Call of Complacency

Magazine article CMA - the Management Accounting Magazine

The Siren Call of Complacency

Article excerpt

They were their own worst enemies. We were victims of our own success." Sound familiar? Firms emerging from a protracted recession should be wary of complacency. Fed by renewed success, complacency may prevent a company from realizing all the potential it has derived from its restructuring and repositioning during troubled times. Here are examples of how complacency manifests itself and some thoughts about how developing companies can sustain their focus and drive.

Seeing the small picture

During the expansionist mid-1980s, many firms were less affected by competition and could reach their sales targets just by riding market growth. One large service company that I worked with consistently attained its target of 20-per-cent growth in annual sales because it dominated a rapidly expanding market. But because the company failed to respond promptly to the threat posed by new competitors, its market share declined significantly -- as did its profits -- when market growth slowed.

With fewer opportunities close to hand, companies must widen their outlook to track their own performance and that of their competitors over a broader landscape. Many companies that have prospered during the early 1990s recession owe their success to sales in entirely new markets.

Pride and prejudice

A self-satisfied company can impede itself from improving quality and customer value. Managers in one company that I worked with often belittled their customers' own technical expertise. The firm disputed most of its customers' warranty claims, ultimately alienating some large clients. Because no one addressed problems in the company's own design and manufacturing process, its rework and return costs remained high.

Companies hoping to retain the commitment of employees and customers must seek, and respond to, feedback from these groups. Firms look increasingly to front-line employees to monitor product and process capability and to respond to problems as they arise. These changes to internal systems encourage accountability and continuous improvement.

Building the organization

Many complacent companies base today's decisions on past circumstances and results. Strong-minded leaders or decision-makers' political motives often inhibit questioning of "conventional wisdom." In order for organizations to better respond to events and opportunities, they must change their decision-making processes -- and perhaps the people making the decisions. …

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